Distribution Solutions Group, Inc. (NASDAQ: DSGR)

Sector: Industrials Industry: Industrial Distribution CIK: 0000703604
Market Cap 1.43 Bn
P/B 2.19
P/E -127.79
P/S 0.72
ROIC (Qtr) 4.73
Div Yield % 0.00
Rev 1y % (Qtr) 10.67
Total Debt (Qtr) 821.24 Mn
Debt/Equity (Qtr) 1.26
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About

Distribution Solutions Group, Inc. (DSG), a global specialty distribution company, operates under the stock symbol 'DSG' and serves the maintenance, repair and operations (MRO), original equipment manufacturer (OEM), and industrial technology markets. The company's primary business activities involve providing value-added distribution solutions to these markets through its three reportable segments: Lawson, TestEquity, and Gexpro Services. These segments cater to the industrial, commercial, institutional, and governmental MRO marketplace, the distribution...

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Investment thesis

Bull case

  • Operating cash flow of 112.62M provides strong 20.35x coverage of stock compensation 5.53M, indicating sustainable incentive practices.
  • Robust free cash flow of 90.93M exceeds capital expenditure of 21.70M by 4.19x, indicating strong organic growth funding capability.
  • Operating cash flow of 112.62M fully covers other non-current liabilities 48.16M by 2.34x, showing strong long-term stability.
  • Tangible assets of 1.06B provide robust 12.04x coverage of other current liabilities 88.22M, indicating strong asset backing.
  • Operating cash flow of 112.62M provides strong 4.80x coverage of tax liabilities 23.48M, showing excellent fiscal position.

Bear case

  • Operating cash flow of 112.62M barely covers its investment activities of (44.76M), with a coverage ratio of -2.52, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 82.70M against inventory of 345.21M, the 0.24 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Cash reserves of 82.70M provide limited coverage of acquisition spending of (23.06M), which is -3.59x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating earnings of 87.67M show weak coverage of depreciation charges of 80.52M, with a 1.09 ratio indicating high capital intensity and potential reinvestment needs.
  • High depreciation of 80.52M relative to operating cash flow of 112.62M, which is 0.71x suggests significant maintenance capital requirements affecting free cash flow.

Segments Breakdown of Revenue (2024)

Geographical Breakdown of Revenue (2024)

Peer comparison

Companies in the Industrial Distribution
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GWW W.W. Grainger, Inc. 79.03 Bn 100.02 8.17 2.72 Bn
2 FAST Fastenal Co 53.26 Bn 103.14 13.77 0.44 Bn
3 FERG Ferguson Enterprises Inc. /DE/ 51.30 Bn 26.23 1.65 6.02 Bn
4 WCC Wesco International Inc 14.66 Bn 22.69 0.62 6.53 Bn
5 WSO Watsco Inc 14.11 Bn 154.32 4.58 0.46 Bn
6 POOL Pool Corp 12.34 Bn 638.65 8.05 1.39 Bn
7 CNM Core & Main, Inc. 10.88 Bn 25.02 1.40 2.43 Bn
8 AIT Applied Industrial Technologies Inc 10.79 Bn 28.81 2.41 0.57 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.24 2.41
EV to Cash from Ops. EV/CFO 19.52 40.73
EV to Debt EV to Debt 2.68 16.40
EV to EBIT EV/EBIT 25.07 18.05
EV to EBITDA EV/EBITDA 12.84 36.64
EV to Free Cash Flow [EV/FCF] EV/FCF 24.17 77.53
EV to Market Cap EV to Market Cap 1.53 1.51
EV to Revenue EV/Rev 1.11 2.64
Price to Book Value [P/B] P/B 2.19 8.70
Price to Earnings [P/E] P/E -127.79 55.05
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 49.20
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 22.67
Dividend per Basic Share Div per Share (Qtr) 0.00 1.88
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 41.28
Interest Coverage Int. cover (Qtr) 1.52 35.27
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -44.89 -47.49
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 9.15 77.69
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 6.21
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -637.51 -84.41
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 61.32 -13.74
EBIT Growth (1y) % EBIT 1y % (Qtr) 151.77 -33.83
EBT Growth (1y) % EBT 1y % (Qtr) 269.09 -41.73
EPS Growth (1y) % EPS 1y % (Qtr) -900.00 -109.80
FCF Growth (1y) % FCF 1y % (Qtr) 278.94 -14.68
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 12.33 1.31
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.12 1.45
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.20
Cash Ratio Cash Ratio (Qtr) 0.27 0.34
Current Ratio Curr Ratio (Qtr) 2.51 2.47
Debt to Equity Ratio Debt/Equity (Qtr) 1.26 0.88
Interest Cover Ratio Int Coverage (Qtr) 1.52 35.27
Times Interest Earned Times Interest Earned (Qtr) 1.52 35.27
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 8.50 7.33
EBIT Margin % EBIT Margin % (Qtr) 4.43 5.34
EBT Margin % EBT Margin % (Qtr) 1.51 4.29
Gross Margin % Gross Margin % (Qtr) 33.60 28.45
Net Profit Margin % Net Margin % (Qtr) -0.60 2.59